RIGA - The multi-profile business group Ventspils Nafta announced last week that it was selling 49 percent of its oil-based subsidiary, Ventspils Nafta Terminals, to the Vitol Group, a major international oil trader. Latvia's Competition Council has approved the deal, which will help Vitol consolidate its foothold in the Baltic state's oil transit business, which has struggled since Russia ceased delivering crude via pipeline in 2003.
The Vitol Group purchased 34 percent of Ventspils Nafta in an auction last October, but by acquiring a near majority stake in subsidiary VNT the company can focus on its core business of oil transit. Much of Ventspils Nafta's assets, such as the Preses Nams publisher, are non-profile for Vitol.
VNT was created in 2003 specifically to attract an investor who would help resuscitate oil flows to and from Ventspils, Latvia's largest port and the second largest in the Baltic states.
Ventspils Nafta owns 100 percent of VNT, and under the transaction Vitol Group's Cyprus-registered subsidiary, Euromin Holdings, will acquire a 49 percent stake, while Ventspils Nafta will retain 51 percent.
The deal takes place at a challenging time for VNT, which last year handled 5.7 million tons of oil and oil products, down nearly 30 percent from 2005. Some 1.24 million tons were delivered by sea, far more than in 2005, which points to a new direction Vitol is taking the company.
The size of the deal was not disclosed. Olga Petersone said an agreement was signed on March 5 and the transaction would likely take place in April.
"In the next few months we and Vitol will work out a development plan for the next five years and then we will release the details of the agreement," Petersone was quoted as saying.
At the same time, private shareholders of Ventspils Nafta slammed the deal. Officials from Ventbunkers, a firm specializing in oil handling, were quoted as saying they were not informed about the deal and that a further sale of assets by Ventspils management could not be ruled out.
Ventbunkers owns a 51.9 percent stake in Latvijas Naftas Tranzits, which, with a 49 percent stake, is the largest shareholder in Ventspils Nafta. However, relations between Ventbunkers managers and executives at Ventspils Nafta have deteriorated to the point that they continually criticize each other in Latvia's mass media, almost on a daily basis. There appears to be no communication between the groups.
In December Ventbunkers was informed by managers of Ventspils Nafta that the services of the former were no longer needed and that VNT would take over Ventsbunkers' oil loading operations.
Ventbunkers traditionally handled oil products by pipeline, which still receives deliveries from Russia.
Ventspils Mayor Aivars Lembergs, as chairman of Ventspils Free Port, is widely believed to be the main force behind Ventspils Nafta, while Oleg Stepanov, one of the chief executives at Ventbunkers, has emerged as Lembergs' arch-rival.
The jockeying takes place on the background of decreasing sales for Ventspils Nafta, VNT's parent company. The company reported last week that consolidated net sales fell 20 percent to 69.2 million lats (98.8 million euros), though it managed to turn a profit of 7.4 million lats.
Company management said in a statement that, "VN's 2006 turnover, which was lower than planned, was affected by the volatile and virtually unpredictable situation with cargo shipments by rail."
Meanwhile, Ventspils Nafta Terminals posted a profit of 600,000 lats, Ventspils Nafta reported. "VN's subsidiary, Ventspils Naftas Terminals, is dependent both on Russia's politically determined high railroad tariffs on cargo outside the country's ports and the high duties on oil exports," Ventspils Nafta said in a statement.
To complicate matters, Ventspils Nafta's chairman, Mamerts Vaivads, was recently detained by police for questioning. In a dramatic twist, he was escorted out of a Riga restaurant on Feb. 21 while eating dinner and detained for two days in a cell while investigators drilled him over money-laundering allegations.
In an interview with the Dienas Bizness daily last week, Vaivads said his detainment was connected with the disagreements among Ventspils Nafta owners.
"Politics is alive all the time. However, I am inclined to think that here we're talking about commercial interests," he said.
Speaking of Stepanov and other Ventbunkers shareholders, Vaivads said not only has he not spoken with them in a long time but that he has no interest in doing so.
The Vitol Group is a privately owned, international trading group specializing in hydrocarbons. It has headquarters in Rotterdam and Geneva.
